Telecommunications charges in Australia 1995-99

Telecommunicationscharges in Australia

1995–99

April 2000

© Australian Competition and Consumer Commission 2000

ISBN 0 642 40252

This work is copyright. Apart from any use as permitted under the Copyright Act 1968 no partmay be reproduced by any process without permission from the Australian Competition andConsumer Commission. Requests and inquiries concerning reproduction and rights should beaddressed to the Director Publishing, Australian Competition and Consumer Commission, POBox 1199, Dickson ACT 2602.

ii

Letter to Minster

Contents

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Main findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Future reporting of telecommunications charges . . . . . . . . . . . . . . . . . . . . 6

1. Connection, labour and annual service charges . . . . . . . . . . . . . . . . . 7

Connection charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Annual service charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

2. Local, community and pastoral calls . . . . . . . . . . . . . . . . . . . . . . 10

Local calls. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Discounts on standard local call charges . . . . . . . . . . . . . . . . . . . 11Average prices paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Community calls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Pastoral calls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

3. National long distance calls. . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Price structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Flagfall charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Variable charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Call prices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Telstra call prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19C&W Optus call prices . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Average prices paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

4. International calls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Price structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24Flagfall charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25Variable charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26Call prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27Telstra call prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28C&W Optus call prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29Discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31Average prices paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

5. Operator-assisted calls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Fixed charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32Variable charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

v

Call prices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

6. Calls from a fixed to cellular mobile service . . . . . . . . . . . . . . . . . . 36

Calls from a Telstra fixed service to a mobile phone. . . . . . . . . . . . . . 36Price structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Calls from a C&W Optus fixed service to a mobile phone. . . . . . . . . . . 38Price structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38Variable charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38Call prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39C&W Optus, 1995 to 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . 39

7. Calls from cellular mobile phone services . . . . . . . . . . . . . . . . . . . 41

Price plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41Connection charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41Access charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42Call prices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42Average prices paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

8. The structure of telecommunications pricing . . . . . . . . . . . . . . . . . . 48

Appendix 1. Weighted average price methodology and future directions . . . . . 51

Appendix 2. Services subject to price control. . . . . . . . . . . . . . . . . . . . 53

Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

vi

Overview

The Australian Competition and Consumer Commission is an independent statutory bodyresponsible for competition regulation of telecommunications within Australia. TheCommission’s responsibilities include enforcing the telecommunications specificanti-competitive conduct provisions and regulating access to telecommunications servicesdeclared by it.

Division 12 of Part XIB of the Trade Practices Act 1974 requires the Commission to monitorand report each financial year to the Minister of Communications, Information Technology andthe Arts on prices paid by consumers for telecommunications services. This report satisfiesthat requirement for the 1998–99 financial year. The Commission engaged theCommunications Research Unit (CRU) of the Department of Communications, InformationTechnology and the Arts to prepare the report.

This report surveys price changes from 1995 to 1999 for all services included in the TelstraCarrier Charges — Price Control Arrangements, Notification and DisallowanceDetermination 1997, except leased line services (which could not be analysed because of datalimitations). The services are:

� connection and rental;

� local, community and pastoral calls;

� national long distance calls;

� international calls;

� operator-assisted calls;

� calls from basic service telephones to mobile phones; and

� cellular mobile services.

The report includes relevant prices for Telstra, Cable & Wireless Optus (C&W Optus) andVodafone, where they supply the services listed above. This is an extension over last year’sreport, where only Telstra’s prices were monitored.

The prices analysed in this report are, where possible:

� the level of, and changes in, the carriers’ standard charges applicable at 30 June each yearbetween 1995 and 1999 (both real and nominal), excluding discount plans and specials; and

� estimates of changes in the average prices paid after discounts.

The report also comments on the structure of the pricing regime and changes that have occurredover the analysis period, and comments on the discount schemes applicable to each service.

Most prices reported are weighted averages because many telecommunications services havemultiple tariff categories and therefore do not have one unique price. A weighted average

1

aggregates the prices from the multiple tariff categories into one single price for the service.Insufficient weighting data were available for some services and in these cases price changesare reported for each tariff category.

The changes in the weighted average prices show how prices have changed on average for eachindividual service and carrier given the usage pattern of their customer base. They cannot beused, however, to assess which carrier would be cheapest for an individual customer becauseindividual usage patterns may differ from those on which the price calculations are based.

It was not possible to estimate changes in average prices paid by consumers after discounts forthe 1997–98 report. In this report, yield data provided by the carriers were used to estimatethese changes.1 This provides a more developed picture of price changes, especially whencarriers are increasing the number of discount plans offered to consumers.

Telecommunications services and their prices are continually changing, and changes thatoccurred since the 1998–99 reporting period have not been captured by this report. However,brief mention is made of post-reporting charges where relevant throughout the report.

Main findings

The report shows that between 1995 and 1999 consumers have continued to benefit fromsignificant price reductions across most services, and particularly for national long distance andinternational calls. Figures 0.1 and 0.2 provide an overview of standard price changes forTelstra and C&W Optus between 1995 and 1999.

A more detailed summary of the major findings is provided below.

2

1 The results are presented as an index for each service to preserve the confidentiality of

the data provided by the carriers.

Figure 0.1. Fixed telephone service weighted average price indices: Telstra

Source: CRU estimates

Figure 0.2. Fixed telephone service weighted average price indices: C&W Optus

Source: CRU estimates

3

Telstra fixed telephone service price indices

30

40

50

60

70

80

90

100

110

1995 1996 1997 1998 1999

year

ind

ex

19

95

=1

00

Local call

Community call

Pastoral call

STD call

Calls to mobiles

International call

C&W Optus fixed telephone weighted average price indices

40

50

60

70

80

90

100

110

1995 1996 1997 1998 1999

year

ind

ex

19

95

=1

00

Local call

national long distance call

Calls to mobiles

International call

Chapter 1 surveys connection and annual service charges between 1995 and 1999. It showsthat up-front charges changed little over the five year period. For example:

� Telstra charges for in-place connections remained at $50 from 1995 to 1999;

� C&W Optus charges also remained constant over this period at $70 for serviceestablishment and $50 for service activation;

� Telstra increased its labour charges in 1999, with the cost of each 15 minutes of attendanceincreasing by 15 per cent to $15 — they had remained unchanged between 1995 and 1998;and

� the line rental charges of both carriers remained unchanged for residential services between1995 and 1999.

Chapter 2 of the report surveys price changes between 1995 and 1999 for local, communityand pastoral calls from a fixed telephone service. It shows that the standard nominal price forTelstra (25 cents) and C&W Optus (20 cents) local calls have remained unchanged, which hasmeant that there has been a decline in real prices (that is, net of inflation) of almost 6 per cent.After local call discounts the decrease has been around 9 per cent in real terms.

Chapter 3 surveys price changes for national long distance calls. It shows that the weightedaverage prices of Telstra and C&W Optus national long distance calls have decreased, despiteincreases in flagfall charges.

Between 1995 and 1999 national long distance weighted average prices of a Telstra and C&WOptus national long distance call decreased by 14 and 20 per cent respectively. Per minutecharges, excluding flagfall charges, decreased by 35 and 25 per cent for Telstra and C&WOptus.

The decrease in prices after discounts was even more significant. The CRU estimates that theaverage prices paid by consumers after discounts fell by 44 per cent between 1995 and 1999.

This resulted from a decrease in the number of hours charged at peak rates and lower variablecall charges for most calls. In 1998 C&W Optus no longer differentiated variable charges bydistance and this decreased the price of calls made to destinations more than 100 kilometresaway.

Chapter 4 surveys price changes for international calls. It shows that the price of internationalcalls also declined significantly between 1995 and 1999. The weighted average price of aTelstra and C&W Optus call declined by 61 and 29 per cent respectively over this time.

The most significant change contributing to these decreases was a decline in variable charges.In 1999 Telstra introduced a single rate applicable to a destination regardless of the time of day.This reduced the weighted average per minute charge of a Telstra international call by 54 percent from 1998. C&W Optus also introduced a similar rate in 1999, but this could not bereflected in the analysis because it occurred after 30 June.

4

Chapter 5 surveys price changes in operator-assisted calls between 1995 and 1999. It showsthat the price movements were mixed for those making operator-assisted calls. Telstra andC&W Optus operator-assisted national long distance calls increased by 20 and 26 centsrespectively in nominal terms.

For operator-assisted international calls using Telstra the call price decreased by 7 per centbetween 1995 and 1999 because of a small decrease in the per minute charge to China; andusing C&W Optus the call price decreased by 34 per cent. C&W Optus charges the same perminute rate for operator-assisted and direct dial calls so customers requiring operator assistancebenefited from the changes to the direct dial tariffs.

Chapter 6 surveys the price changes for calls from a fixed to cellular mobile service. It showsthat the price of calls from a fixed telephone to mobile phone service did not changesignificantly between 1995 and 1999. For example:

� the weighted average price of a Telstra call decreased by 8 per cent to 77 cents; and

� the weighted average price of a C&W Optus call increased by 4 per cent to 75 cents.

The most significant pricing changes for these calls was the introduction of two part pricing byTelstra in 1999 and an increase in the flagfall charge levied by C&W Optus in 1998.

Chapter 7 surveys calls from cellular mobile phone services. It shows that the average priceper minute paid by consumers for mobile telephony, including access, connection and callcharges but excluding handset costs, is estimated to have declined between 1997 and 1999.The CRU estimates that nominal price per minute has declined by around 10 per cent.However, the average prices paid per minute by consumers for analogue services are estimatedto have increased by around 2 per cent in nominal terms over this time.

Notwithstanding this finding the Commission is unable to comment with any authority on theoverall price movements for mobile telephony because of insufficient data to analyse theplethora of mobile pricing plans. The CRU is currently developing a methodology to improvethe reporting of mobile phone prices.

Chapter 8 provides a discussion of the changed structure of telecommunications pricing. Itshows that the standard charges for connection, line rental and local call services have notchanged significantly since 1995, which has meant that fixed charges have increased as aproportion of total expenditure on telecommunications charges.

Further, between 1995 and 1999, flagfall charges for national long distance and internationalcalls increased. Given the significant and steady decline in the variable charges for nationallong distance and international calls, this has meant that fixed charges have increased as aproportion of total call costs.

Appendix 1 outlines the weighted average pricing methodology of the report.

Appendix 2 summarises the services subject to the price control arrangements up to mid-1999.

5

Future reporting of telecommunicationscharges

The Commission is continually seeking to make this report more informative and relevant. It iscurrently reviewing the scope and methodology of the report. Major issues include:

� the number of carriers and services monitored for the report;

� the methodology of the report; and

� the manner in which information is presented in the report.

This includes the methodology used in reporting on mobile telephony.

The Commission is considering the merits of adopting a basket or index approach compared tothe current approach of calculating a weighted average price for each service. This approachhas been used, for example, by the Productivity Commission (1999 and 1999a) in its two recentstudies on international comparisons of telecommunications prices.

The Commission will be consulting with industry and other relevant parties to seek their viewson these matters in the near future.

6

1. Connection, labour and annual servicecharges

Connection and annual service charges for a fixed or basic telephone service are generallylevied irrespective of usage. Consequently, these fees comprise a larger proportion of the totalcost of a basic telephone service for low-volume users than higher-volume users.

Standard connection, labour and annual service charges are simply listed in this study. Datadetailing the relative contributions of different connection and annual service charges toTelstra’s and C&W Optus’ revenue, which would have enabled the derivation of revenueweights for weighted average calculations, were not available.

Charges are also levied for the use of handsets to access the telephone network although thesecharges have not been included in this study.

Connection charges

Connection charges for a fixed telephone service are levied when a customer is connected to aservice on the basic telephone network. A separate charge is levied for each additionalconnection.

Three categories of connection charges levied by Telstra were analysed (table 1.1). Thestandard charge for:

� in place connections, requiring only exchange work, remained at $50 over the analysisperiod. Pensioners received a 50 per cent concession over the period paying $25;

� a first connection, excluding labour charges, was $120 between 1995 and 1997; the chargeincreased by 44 per cent to $173 in 1998 and remained at that level in 1999. Pensionersreceived a $50 discount on the standard charge; and

� each additional connection declined by 4 per cent to $128 in 1999 after increasing by11 per cent in 1998. A $50 discount was introduced for pensioners in 1998.

Two categories of connection charges levied by C&W Optus were analysed (table 1.1). Thestandard charge for:

� service establishment or connection to the C&W Optus service remained unchanged at $70between 1995 and 1999; and

� the service activation or the ‘switching on’ of the service remained unchanged at $50between 1995 and 1999.

C&W Optus did not report providing discounts on these charges for pensioner customers.

7

Table 1.1. Connection charges: 1995 to 1996

1995 1996 1997 1998 1999

Telstra

In-place connection 50 50 50 50 50

In-place connection, pensioner 25 25 25 25 25

New first connection 120 120 120 173 173

New first connection, pensioner 70 70 70 123 123

New second & subsequent connections 120 120 120 133 128

New second & subsequent connections,pensioner

120 120 120 83 78

C&W Optus

Service establishment charge 70 70 70 70 70

Service activation charge 50 50 50 50 50

Source: Telstra (various issues), Public Switched Telephone Service Standard Tariff, and dataprovided by C&W Optus to the Commission.

Labour charges

Labour charges are levied if physical attendance of a telephone company employee is requiredto connect a service. Two categories of labour charges levied by Telstra were analysed (table1.2). The standard charge for:

� attendance increased by 12.5 per cent to $45 in 1999, after remaining at $40 between 1995and 1998; and

� labour per 15 minutes increased by 15 per cent to $15 in 1999, after remaining at $13between 1995 and 1998.

8

Table 1.2. Telstra labour chargesa: 1995 to 1999

1995 1996 1997 1998 1999

Attendance 40 40 40 40 45

Per 15 minutes 13 13 13 13 15

a per person, during standard business hours.Source: Telstra (various issues), Public Switched Telephone Service Standard Tariff.

C&W Optus was not asked to supply data on labour charges for this study.

Annual service charges

Annual service fees are levied for ongoing access to the network.

Three categories of annual service charges levied by Telstra were analysed (table 1.3). Thestandard annual charge for:

� a standard business service fell by 13 per cent in 1996 to its current level of $240;

� a non-profit business service was unchanged at $139.80 between 1995 and 1999; and

� a non-business or residential service was unchanged at $139.80 between 1995 and 1999.

Two categories of annual service charges levied by C&W Optus (table 1.3) were analysed. Thestandard annual charge for:

� a business service was unchanged at $139.80 between 1998 and 1999; and

� a residential service was unchanged at $139.80 between 1996 and 1999. Pensionersreceived a $6 concession on this charge paying $133.80 over the period.

Table 1.3. Annual service charges: 1995 to 1999

1995 1996 1997 1998 1999

Telstra

Standard business service 275.00 240.00 240.00 240.00 240.00

Non-profit business service 139.80 139.80 139.80 139.80 139.80

Non-business service 139.80 139.80 139.80 139.80 139.80

C&W Optus

Business service na na na 139.80 139.80

Residential service na 139.80 139.80 139.80 139.80

Pensioner service na 133.80 133.80 133.80 133.80

Source: Telstra (various issues), Public Switched Telephone Service Standard Tariff, and dataprovided by C&W Optus to the Commission.

9

2. Local, community and pastoral calls

Local calls

Telstra and C&W Optus offer untimed local calls from a fixed line service. The standardnominal price for:

� a Telstra local call remained at 25 cents between 1995 and 1999; in real prices this is a 6per cent decline (table 2.1). Pensioners received a concession over the period, paying 15cents a call for their first 10 calls made each month; and

� a C&W Optus local call remained unchanged at 20 cents between 1996, when it enteredthe local call market in Melbourne and Sydney, and 1999. In real prices this is a 3 per centdecline (table 2.1). The 20 cents local call, however, is only offered to customers directlyconnected to C&W Optus’ network. Customers not directly connected to its network pay22 cents for local calls. Pensioners received a concession in 1996 paying 15 cents a call,but in 1997 this concession was removed.

Table 2.1. Price of a local call from a fixed line service: 1995 to 1999

Telstra C&W Optus

At 30 June Nominala

($/call)Realb

($/call)Change

in realprices

Indexc Nominala

($/call)Realb

($/call)Change

in realprices

Indexc

1995 0.25 0.27 100 na

1996 0.25 0.26 -4% 96 0.20 0.21 100

1997 0.25 0.25 -1% 95 0.20 0.20 -1% 99

1998 0.25 0.25 0% 95 0.20 0.20 0% 99

1999 0.25 0.25 -1% 94 0.20 0.20 -1% 97

a excluding pensioner and other discounts.b Real prices were indexed using the CPI and are expressed in 1998–99 dollars.c Index is calculated using real prices.Source: CRU estimates based on data in Telstra (various issues), Public Switched Telephone Service

Standard Tariff, and data provided by C&W Optus to the Commission.

There have been changes in the local call market in the latter part of 1999 and early 2000 thathave resulted in further reductions in the price of local calls.

10

Discounts on standard local call charges

Customers may reduce the cost of their local calls by taking advantage of discount plans.

Telstra local calls are eligible for Flexi-Plan® discounts through the EasySaverTM packages. Bypaying a higher annual service charge the price of a local call may be reduced by up to 28 and52 per cent for households and businesses. These plans benefit average customers as well ashigh usage customers.

C&W Optus offers its long distance customers the option of including their Telstra local callson their C&W Optus bill for long distance calls through Local Access Resale. Residentialcustomers choosing this option receive a 5 per cent discount on the cost of each 25 cent localcall made with Telstra. Business customers receive a discount of up to 12 per cent, the size ofthe discount being contingent upon the size of the local call bill.

Since 1997 C&W Optus has also offered its customers local calls for 15 cents on six specialdays a year, such as Christmas day.

Average prices paid

Telstra and C&W Optus supplied aggregated revenue and traffic data allowing average pricepaid per local call to be estimated for the market, inclusive of discounts and specials. Theaverage price paid is equal to total revenue divided by the total number of calls. The CRUestimates that the average price paid for a local call has declined by around 9 per cent in realterms since 1995 (figure 2.1) compared to the standard price which has decreased by around6 per cent in real terms.

Figure 2.1. Change in average prices paid for local calls: 1995 to 1999

Source: CRU estimates based on data provided by Telstra and C&W Optus.

11

80

85

90

95

100

105

110

1995 1996 1997 1998 1999

Year

ind

ex

1995

=100

Nominal

Real

Community calls

Community calls are made between basic telephone services in neighbouring communityaccess zones or within a charging district. Community access zones and charging districts aredefined in Telstra’s Public Switched Telephone Service Tariff. C&W Optus also providescommunity calls to customers connected to its local and national long distance services, but asno data on these calls was provided only Telstra community calls were analysed in this study.

Between 1995 and 1997 community calls were charged at 25 cents per chargeable period. Thiswas either 180 seconds during peak or evening periods, or 270 seconds during economy hours.

In 1998 Telstra introduced two-part pricing for community calls consisting of a flagfall and avariable charge related to the length of the call. Different variable rates apply to different peakand off-peak time bands. In 1999 Telstra increased the flagfall charge by 25 per cent from12 to 15 cents and decreased standard variable charges across all time bands by around10 per cent.

The effect of the changes was a 3 per cent fall in the average real price of a community callbetween 1998 and 1999. While the cost of a three minute community call did not change in1999, the cost of five and 10 minute calls declined by 3 and 7 per cent.

Table 2.2. Weighted average prices community calls: Telstra, 1995 to 1999

At 30 June Nominal($/call)

Real*

($/call)Change inreal prices

Indexa

Three minute call1995 0.25 0.27 100

1996 0.25 0.26 -4% 96

1997 0.25 0.25 -1% 95

1998 0.36 0.36 43% 136

1999 0.36 0.36 0% 136

Five minute call1995 0.50 0.53 100

1996 0.50 0.51 -4% 96

1997 0.50 0.51 -1% 95

1998 0.52 0.52 3% 98

1999 0.51 0.51 -3% 95

12

Ten minute call1995 0.94 1.01 100

1996 0.92 0.95 -6% 94

1997 0.91 0.92 -3% 91

1998 0.91 0.93 1% 92

1999 0.86 0.86 -7% 86

An average lengthcommunity call1995 0.50 0.53 100

1996 0.50 0.51 -4% 96

1997 0.50 0.51 -1% 95

1998 0.50 0.50 0% 94

1999 0.49 0.49 -3% 92

* Real prices were indexed using the CPI and are expressed in 1998–99 dollars.a Index is calculated using real prices.Source: CRU estimates based on Telstra (various issues), Public Switched Telephone Service

Standard Tariff, and data provided by Telstra to the Commission.

Pastoral calls

A pastoral call is a call made between basic telephone services that are either:

� in the same extended charging zone;

� in the same community access zone but with one service in an extended access zone; or

� in the same community access zone but with one service in a standard charging zoneadjacent to one or more extended charging zones.2

Between 1995 and 1998, pastoral calls were charged at 25 cents per 270 seconds regardless ofthe time of day or distance over which the call was made. In 1999 this was extended to 300seconds, cutting the cost of five and ten minute calls by 51 and 34 per cent. There was nochange to the nominal price of a three minute call.

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2 Telstra’s Public Switched Telephone Service Tariff defines extended charging zones,

community access zones and standard charging zones.

Table 2.3. Weighted average prices pastoral calls: Telstra, 1995 to 1999


Real*


Indexa


1996 0.25 0.26 -4% 96

1997 0.25 0.25 -1% 95

1998 0.25 0.25 0% 95

1999 0.25 0.25 -1% 94


1996 0.50 0.51 -4% 96

1997 0.50 0.51 -1% 95

1998 0.50 0.51 0% 95

1999 0.25 0.25 -51% 47

Ten minute call1995 0.75 0.80 100

1996 0.75 0.77 -4% 96

1997 0.75 0.76 -1% 95

1998 0.75 0.76 0% 95

1999 0.50 0.50 -34% 62

An average length pastoral call1995 0.34 0.36 100

1996 0.34 0.35 -4% 96

1997 0.34 0.34 -1% 95

1998 0.34 0.34 0% 95

1999 0.34 0.34 -1% 94

* Real prices were indexed using the CPI and are expressed in 1998–99 dollars.a Index is calculated using real prices.Source: CRU estimates based on Telstra (various issues), Public Switched Telephone Service


14

3. National long distance calls

Price structure

Telstra and C&W Optus provide long distance calls that are timed. Both carriers use a two partpricing structure consisting of:

� a flagfall that is levied when the call is connected; and

� a variable charge that can vary by time of day, distance and call duration.

Telstra has two price structures for its national long distance calls, the applicable structuredetermined by whether a call is made through an exchange with call charge recording (CCR) ormetered pulse charging. Since the vast majority of Telstra exchanges operate with CCR, thisprice structure was analysed.

In 1995 Telstra and C&W Optus had 20 and 24 different per minute charges. By 1999,however, these had been reduced to 12 and three respectively.

The main source of the reduced number of variable charges has been a reduction in the numberof distance zones. By 1999 Telstra and C&W Optus had effectively reduced the number oftheir distance zones to four and one respectively.

The carriers have also redefined their time zones so that by 1999 a smaller number of hours perweek were subject to peak rates and a larger number of hours per week eligible for off-peak oreconomy rates (table 3.1).

Table 3.1. Weekly number of hours for time zones: national long distance calls, 1995to 1999

Charge rate 1995 1996 1997 1998 1999

Telstra

Peak 50 50 50 30 30

Afternoon - - - 30 30

Night 16 16 10 - -

Economy 102 102 108 108 108

C&W Optus

Peak 55 55 50 50 50

Off peak 52 52 56 70 70

Weekend 61 61 62 48 48

Source: Telstra (various issues), Public Switched Telephone Service Standard Tariff, and informationprovided by C&W Optus to the Commission.

15

Telstra and C&W Optus were able to provide limited data on average call durations during1998 for national long distance calls. The following observations may be made.

� Average call durations varied between the carriers, resulting in notably different weightedaverage call prices for an average length call with each carrier.

� The longest calls were made to destinations greater than 745 kilometres away during offpeak periods. These calls were on average between eight to 10 minutes long.

� The shortest calls were made during peak periods and to destinations less than100 kilometres away. These calls were on average around three minutes long.

The lack of time series data over this period made it impossible to analyse changes in callduration and consumer behaviour in response to increased competition. For example, it wasnot possible to analyse how the introduction of Telstra’s $3 capped STD calls in the eveningsaffected consumer behaviour.

Flagfall charges

The standard flagfall charge for:

� a Telstra STD (national long distance) call increased by 25 per cent to 15 cents in 1998 andremained unchanged in 1999. In real prices this is a 17 per cent increase between 1995 and1999; and

� a C&W Optus national long distance call increased to 12 cents in 1996 and 15 cents in1998. In real prices this is a 40 per cent increase between 1995 and 1999.

16

Table 3.2. Flagfall charge for a national long distance calls, 1995 to 1999

Telstra C&W Optus

At 30 June Nominal$

Real*

$Change inreal prices

Indexa Nominal$

Real*

$Change

in realprices

Indexa

1995 0.12 0.13 100 0.10 0.11 100

1996 0.12 0.12 -4% 96 0.12 0.12 15% 115

1997 0.12 0.12 -1% 95 0.12 0.12 -1% 114

1998 0.15 0.15 25% 118 0.15 0.15 25% 142

1999 0.15 0.15 -1% 117 0.15 0.15 -1% 140

* Real prices were indexed using the CPI and expressed in 1998–99 dollars.a Index is calculated using real prices.Source: CRU estimates based on Telstra (various issues), Public Switched Telephone Service

Standard Tariff, and information provided by C&W Optus to the Commission.

Variable charges

Between 1995 and 1999 Telstra and C&W Optus increased some variable charges whiledecreasing others. In 1998 and to a lesser extent 1997, for example, Telstra increased a largeproportion of its timed charges across most time and distance zones before reducing them in1999. Between 1996 and 1998 C&W Optus increased most of its timed charges for calls madeto destinations less than 100 kilometres away, but decreased charges for all calls made to moredistant destinations. While this made some calls more expensive, the net effect was a decreasein the price of the majority of C&W Optus national long distance calls.

As a result of these changes, the weighted average variable charge for:

� each Telstra minute (table 3.3) fell by 4 cents in 1999 to 19 cents. In real prices this is an18 per cent decline from the previous year. Since 1995 there has been a 35 per cent declinein real prices; and

� each C&W Optus minute (table 3.4) fell by 3 cents to 21 cents in 1998. In real prices thisis a decrease of 14 per cent from 1997 and 25 per cent between 1995 and 1999.

17

Table 3.3. Weighted average variable charge for national long distance calls: Telstra,1995 to 1999

At 30 June Nominal($/min)

Real*

($/min)Change inreal prices

Indexa

1995 0.27 0.29 100

1996 0.24 0.25 -16% 84

1997 0.23 0.24 -4% 81

1998 0.23 0.23 -2% 79

1999 0.19 0.19 -18% 65

* Real prices were indexed using the CPI and expressed in 1998–99 dollars.a Index is calculated using real prices.Source: CRU estimates based on Telstra (various issues), Public Switched Telephone Service


Table 3.4. Weighted average variable charge for national long distance calls: C&WOptus 1995 to 1999


Real*


Indexa

1995 0.26 0.28 100

1996 0.24 0.25 -10% 90

1997 0.24 0.24 -2% 87

1998 0.21 0.21 -14% 76

1999 0.21 0.21 -1% 75

* Real prices were indexed using the CPI and expressed in 1998–99 dollars.a Index is calculated using real prices.Source: CRU estimates based on information provided by C&W Optus to the Commission.

Call prices

To analyse the effect of changes to the pricing regime for long distance calls, the CRUestimated changes to the weighted average price of three, five and 10 minute calls. It alsocalculated the weighted average price of an average length call for each carrier where the callaverage duration for the carrier was held constant over the study period. The average calldurations, which are total call minutes divided by total calls, tend to increase with distance andduring off peak periods.

It is not valid to use the weighted average prices to assess which carrier would be cheapest foran individual customer. This is because call patterns vary between carriers and an individual’susage pattern may differ from those on which the price calculations are based.

18

Telstra call prices

The weighted average price of Telstra national long distance calls analysed as part of this studydeclined in 1999. This was due to a fall in the standard variable charges across all time anddistance zones. The weighted average price for:

� a three minute call declined by 11 cents in 1999 and 22 cents since 1995 (table 3.5). Inreal prices this is a decrease of 15 per cent from 1998 and 28 per cent since 1995;

� a five minute call fell by 19 cents to $1.10 in 1999. In real prices this is a decrease of 16per cent from 1998 and 31 per cent since 1995;

� a ten minute call fell by 27 cents in 1999 to $2.05. In real prices this is a 13 per centdecline since 1998 and 33 per cent since 1995; and

� an average length Telstra national long distance call (table 3.5) fell by 24 cents to $1.33in 1999 due to lower variable charges. Since 1995 the average real price of a call has fallenby 14 per cent, although in 1997 and 1998 prices increased because of increases in variablecharges across some time and distance zones.

Table 3.5. Weighted average prices national long distance calls: Telstra, 1995 to 1999b


Real*


Indexa


1996 0.84 0.86 -14% 86

1997 0.82 0.83 -4% 83

1998 0.83 0.84 2% 84

1999 0.72 0.72 -15% 72


1996 1.32 1.35 -15% 85

1997 1.29 1.30 -4% 82

1998 1.29 1.31 0% 82

1999 1.10 1.10 -16% 69

Ten minute call1995 2.85 3.05 100

1996 2.52 2.59 -15% 85

1997 2.45 2.48 -4% 81

1998 2.32 2.35 -5% 77

1999 2.05 2.05 -13% 67

19

An average length Telstra call1995 1.45 1.55 100

1996 1.43 1.47 -5% 95

1997 1.49 1.50 2% 97

1998 1.57 1.59 6% 103

1999 1.33 1.33 -16% 86

* Real prices were indexed using the CPI and are expressed in 1998–99 dollars.a Index is calculated using real prices.b It is not valid to use the weighted average prices to assess which carrier would be cheapest

for an individual customer.Source: CRU estimates based on data provided by Telstra to the Commission.

C&W Optus call prices

The weighted average price of C&W Optus national long distance calls analysed as part of thisstudy declined marginally in 1999 after a larger decline in 1998. This resulted from variablecharges no longer being differentiated by distance and decreasing for calls being made todestinations more than 100 kilometres away. The weighted average price for:

� a three minute call fell by 7 cents in 1998 and 11 cents between 1995 and 1999 (table 3.6).In real prices this is an 18 per cent decrease in price over the period;

� a five minute call declined by 13 cents in 1998 to $1.19. In real prices this is a decrease of10 per cent from 1997 and 21 per cent between 1995 and 1999;

� a ten minute call fell by the largest amount over the period. In 1998 the price fell by 30cents from the previous year and 47 cents over the entire period. In real prices this is a 23per cent decline since 1995; and

� of an average length C&W Optus national long distance call (table 3.6) fell by 12 centsto 99 cents in 1998. Since 1995, the average real price has fallen by 20 per cent.

20

Table 3.6. Weighted average prices national long distance calls: C&W Optus, 1995 –1999b


Real*


Indexa


1996 0.85 0.87 -7% 93

1997 0.84 0.85 -2% 90

1998 0.77 0.78 -8% 83

1999 0.77 0.77 -1% 82


1996 1.33 1.37 -9% 91

1997 1.32 1.34 -2% 89

1998 1.19 1.20 -10% 80

1999 1.19 1.19 -1% 79

Ten minute call1995 2.70 2.89 100

1996 2.55 2.61 -9% 91

1997 2.52 2.55 -2% 88

1998 2.22 2.25 -12% 78

1999 2.22 2.22 -1% 77

An average length C&WOptus call1995 1.15 1.23 100

1996 1.10 1.12 -9% 91

1997 1.11 1.12 0% 91

1998 0.99 1.00 -12% 81

1999 0.99 0.99 -1% 80


for an individual customer.Source: CRU estimates based on data provided by C&W Optus to the Commission.

21

Discounts

Telstra and C&W Optus offer discounts and promotions on national long distance calls thatmay reduce average prices paid.

In 1999 Telstra reduced the number of Flexi-Plans available for national long distance calls. Itno longer provided Flexi-Plan discounts to non-business customers with a basic telephoneservice, but did continue to cap the price of weekday evening STD calls at a maximum of $3.

The Long Distance Saver 4 Flexi-Plan is still available to business customers with more thanone service, but the discounts applicable under this plan have been reduced. In 1999, ifexpenditure on eligible calls was between $500 and $1000, a discount of 5 per cent was given.In 1998 the applicable discount was 17 per cent. The highest possible discount available in1999 was 10 per cent and applied to eligible calls over $450 000. In 1998 the same discountwas 23 per cent. Loyalty discounts still apply under this Flexi-Plan with up to an additional 3per cent discount available for customers who have held the Long Distance Saver 4 Flexi-Planfor 24 months or more.

In 1999 C&W Optus offered its business customers loyalty discounts in the form of rebates onthe annual cost of their national long distance phone bill. For example, if a customer remainswith C&W Optus for one year they receive a rebate of 5 per cent on their entire year’s longdistance phone bill. After two and three years the rebate increases to 8 and 10 per cent. C&WOptus also provides discounts to small businesses if they combine their Telstra local call andC&W Optus long distance bills.

Until November 1999 C&W Optus charged a maximum of $3.00 for any national long distancecall made between 7 p.m. and midnight Monday to Friday. At that time it introduced‘Freetime’. This capped the cost of a national long distance call up to three hours long made atany time to $3.00.

Average prices paid

The average price per minute paid by consumers for a national long distance call, inclusive ofall discounts and concessions, is estimated to have declined significantly between 1995 and1999. The CRU estimates that the price per minute has declined by around one third. In realprices this is a decline of 37 per cent.

22

Figure 3.1. Change in average price paid per call minute: National long distance calls,1995 to 1999


23

50

60

70

80

90

100

110

1995 1996 1997 1998 1999

Year

ind

ex

1995

=100

Real

Nominal

4. International calls

The prices of international calls made to the 25 countries that represent more than 80 per centof international call revenues for Telstra and C&W Optus in 1998 were analysed. Countriesincluded in the sample were:

CanadaChinaFijiFranceGermanyGreeceHong KongIndia

IndonesiaItalyJapanKorea, Sth R.LebanonMalaysiaNetherlandsNew Zealand

Papua New GuineaPhilippinesSingaporeSouth AfricaTaiwanThailandUnited KingdomUnited StatesVietnam

Price structure

As with national long distance calls, Telstra and C&W Optus provide international calls thatare timed. Both carriers use a two part pricing structure consisting of:

� a flagfall that is levied when the call is connected; and

� a variable charge that can vary by country, time of day and call duration.

Between 1995 and 1999 both carriers varied the number of hours a week subject to peak andoff peak charges. In 1999 Telstra ceased charging different rates for international calls made atdifferent times of the day and introduced an ‘Everyday rate’ for each destination. C&W Optusalso introduced a similar pricing structure in 1999, which reduced the price of theirinternational calls significantly; but as these changes were introduced after 30 June 1999 theyare outside the scope of this analysis and their effects are not reflected in this report.

24

Table 4.1. Hours per week subject to peak and other rates for international calls,1995 – 1999

Charge rate 1995 1996 1997 1998 1999

Telstra

Peak 73 56 50 50 -

Off peak 95 112 118 70 -

Weekend - - - 48 -

Everyday - - - - 168

C&W Optus

Peak 45 45 45 50 -

Off peak 123 123 123 70 -

Weekday - - - - 120

Weekend - - - 48 48

Source: Public Switched Telephone Service Standard Tariff, Telstra and information provided byC&W Optus to the Commission.

Average call duration varies between the sample countries but there is no clear pattern. As callduration data provided by the carriers was for 1998, the effect on average call durations of theintroduction of single rates to particular destinations, regardless of time of day, cannot beestimated.

Flagfall charges

Flagfall charges for international calls moved in line with the flagfall charges for national longdistance calls for both carriers. As a result the flagfall charge for:

� a Telstra international call increased by 25 per cent to 15 cents in 1998 and remainedunchanged in 1999 (table 4.2). In real prices this is a 17 per cent increase between 1995and 1999; and

� a C&W Optus international call increased to 12 cents in 1996 and 15 cents in 1998 (table4.2). In real prices this is a 40 per cent increase between 1995 and 1999.

25

Table 4.2. Flagfall charge for an international call: Telstra and C&W Optus, 1995 to1999

Telstra C&W Optus

At 30June

Nominal$

Real*

$Change

in realprices

Indexa Nominal$

Real*

$Change

in realprices

Indexa

1995 0.12 0.13 100 0.10 0.11 100

1996 0.12 0.12 -4% 96 0.12 0.12 15% 115

1997 0.12 0.12 -1% 95 0.12 0.12 -1% 114

1998 0.15 0.15 25% 118 0.15 0.15 25% 142

1999 0.15 0.15 -1% 117 0.15 0.15 -1% 140

* Real prices were indexed using the CPI and expressed in 1998–99 dollars.a Index is calculated using real prices.Source: CRU estimates, based on Telstra (various issues), Public Switched Telephone Service

Standard Tariff, and information provided by C&W Optus to the Commission.

Variable charges

Nearly all variable charges levied by Telstra and C&W Optus for international calls tocountries in the sample declined between 1995 and 1999. Changes to the hours charged at peakand off peak rates may have led to higher prices in some years for some consumers, but by1999 the average price per minute to all countries had decreased.

With the introduction of Telstra’s ‘Everyday’ rate in 1999, nominal peak rates fell by anaverage of 60 per cent while weekend rates fell by around 43 per cent. While all ratesdecreased, the biggest decreases in per minute charges occurred for calls to the United States,Greece and New Zealand where prices fell by 70, 66, and 65 per cent respectively from 1998.The smallest decreases occurred for calls to Vietnam, India and Papua New Guinea whereprices fell by 28, 35 and 34 per cent respectively.

With the introduction of C&W Optus’ ‘Weekday’ and ‘Weekend’ rates, nominal peak rates fellby an average of 29 per cent while ‘Weekend’ charges decreased by an average of 8 per cent.All rates fell, with the exception of weekend calls to Indonesia and Vietnam which did notchange. The biggest decreases in per minute charges occurred for calls to Greece, China andSouth Korea with average per minute prices falling by 31, 28 and 28 per cent respectively. Thesmallest decreases occurred for calls to Indonesia, Papua New Guinea and Vietnam with pricesfalling by an average 4, 7 and 8 per cent respectively.

As a result of these changes the weighted average variable charge for:

� each Telstra minute (table 4.3) fell by 63 cents in 1999 from the previous year and by 79cents since 1995. This is a decline in real prices of 54 per cent from 1998 and 62 per centfrom 1995; and

26

� each C&W Optus minute (table 4.4) fell by 17 cents to 92 cents in 1999 and by 29 centssince 1995. In real prices this a decrease of 17 per cent from 1998 and 29 per cent since1995.

Table 4.3. Weighted average variable charge for an international call: Telstra, 1995to 1999


Real*

($/min)Change in real

pricesIndexa

1995 1.34 1.43 100

1996 1.31 1.35 -6% 94

1997 1.27 1.29 -4% 90

1998 1.18 1.20 -7% 84

1999 0.55 0.55 -54% 38


Standard Tariff, and information provided by Telstra to the Commission.

Table 4.4. Weighted average variable charge for an international call: C&W Optus,1995 to 1999


Real*


pricesIndexa

1995 1.21 1.29 100

1996 1.20 1.24 -5% 95

1997 1.18 1.19 -4% 92

1998 1.09 1.10 -7% 85

1999 0.92 0.92 -17% 71

* Real prices were indexed using the CPI and are expressed in 1998–99 dollars.a Index is calculated using real prices.Note: C&W Optus prices decreased significantly after 30 June 1999.Source: CRU estimates based on X data provided by C&W Optus to the Commission.

Call prices

The CRU estimated changes to the weighted average price of three, five and 10 minute callsand an average length call based on average call durations to each sample country. Asmentioned previously, it is not valid to use the weighted average prices to assess which carrierwould be cheapest for an individual customer. This is because call patterns vary betweencarriers and an individual’s usage pattern may differ from those on which the price calculationsare based.

27

Telstra call prices

The weighted average price of all Telstra international calls analysed as part of this studydecreased between 1995 and 1999. This resulted from a decrease in the per minute rates forcalls to countries in the sample. The weighted average price for a Telstra:

� three minute call declined from $3.70 in 1998 to $1.79 in 1999 (table 4.5). In real pricesthis is a decrease in price of 52 per cent from 1998 and 60 per cent from 1995;

� five minute call fell from $6.06 in 1998 to $2.88 in 1999. In real prices this is a decrease of53 per cent from 1998 and 60 per cent since 1995;

� ten minute call fell by the largest amount, from $11.97 in 1998 to $5.61 in 1999; a fall of 54per cent in real terms from 1998 and 61 per cent since 1995; and

� average length international call (table 4.5) has fallen from $8.61 in 1995 to $3.63 in 1999.In real prices this is a decrease of 61 per cent since 1995.

Table 4.5. Weighted average prices of international calls: Telstra, 1995 – 1999b


Real*

($/call)Change

in realprices

Indexa


1996 4.05 4.16 -6% 94

1997 3.94 3.99 -4% 90

1998 3.70 3.74 -6% 85

1999 1.79 1.79 -52% 40


1996 6.67 6.85 -5% 95

1997 6.49 6.57 -4% 91

1998 6.06 6.14 -7% 85

1999 2.88 2.88 -53% 40

Ten minute call1995 13.53 14.47 100

1996 13.23 13.57 -6% 94

1997 12.86 13.02 -4% 90

1998 11.97 12.12 -7% 84

1999 5.61 5.61 -54% 39

28

An average length internationalcall with Telstra1995 8.61 9.21 100

1996 8.55 8.77 -5% 95

1997 8.29 8.40 -4% 91

1998 7.74 7.84 -7% 85

1999 3.63 3.63 -54% 39


for an individual customer.Source: CRU estimates based on Telstra, (various issues), Public Switched Telephone Service


C&W Optus call prices

The weighted average price of all C&W Optus international calls analysed as part of this studydecreased between 1995 and 1999. This was due to a decrease in the per minute rates. Theweighted average price of a C&W Optus:

� three minute call fell from $3.41 in 1998 to $2.90 in 1999 (table 4.6). In real prices this isa decrease of 16 per cent from 1998 and 27 per cent since 1995;

� five minute call declined from $5.59 in 1998 to $4.73 in 1999. In real prices this is adecrease of 16 per cent from 1998 and 28 per cent since 1995;

� ten minute call fell by the largest amount from $11.03 in 1998 to $9.32 in 1999; a declineof 17 per cent in real terms from 1998 and 29 per cent since 1995; and

� average length international call (table 4.6) has decreased from $7.94 in 1995 to $6.06 in1999 which is a decline of 29 per cent in real terms.

29

Table 4.6. Weighted average prices of international calls: C&W Optus,1995 to 1999b


Real*


Indexa


1996 3.73 3.83 -4% 96

1997 3.65 3.69 -4% 92

1998 3.41 3.46 -6% 87

1999 2.90 2.90 -16% 73

Five minutecall1995

6.15 6.58 100

1996 6.14 6.31 -4% 96

1997 6.00 6.07 -4% 92

1998 5.59 5.66 -7% 86

1999 4.73 4.73 -16% 72

Ten minute call1995 12.21 13.05 100

1996 12.17 12.49 -4% 96

1997 11.87 12.02 -4% 92

1998 11.03 11.17 -7% 86

1999 9.32 9.32 -17% 71

An average length internationalcall with C&W Optus1995 7.94 8.49 100

1996 7.91 8.12 -4% 96

1997 7.69 7.79 -4% 92

1998 7.17 7.26 -7% 86

1999 6.06 6.06 -16% 71


for an individual customer.Source: CRU estimates based on data provided by C&W Optus to the Commission.

30

Discounts

Telstra offers customers who make above-average-length international calls the chance topurchase 30 minute blocks of time at concession rates. Each call destination country has itsown rate. C&W Optus did not provide any details of discount plans for international calls.Both carriers appear to give short term discounts and promotions that lead to lower prices forcustomers.

Average prices paid

The average per minute price paid by consumers for international calls, inclusive of alldiscounts, specials and promotions, is estimated to have declined significantly between 1995and 1999. The CRU estimates that the nominal price per minute has declined by around 35 percent. In real prices this is a 40 per cent decrease.

Figure 4.1. Change in average price paid per call minute: International calls, 1995 to1999


31

405060708090

100110

1995 1996 1997 1998 1999

Year

index

1995=100

Real

Nominal

5. Operator-assisted calls

Telstra and C&W Optus have slightly different price structures for operator-assisted calls.

Telstra charges a fixed surcharge plus a variable charge per 180 seconds for its national longdistance calls made with operator assistance and a fixed surcharge plus variable charge perminute for its international calls. The variable charges for operator-assisted calls are higherthan those applicable to direct dial calls.

C&W Optus charges a flagfall, which is the same as for direct dial calls, a fixed service fee anda variable per minute charge for its national long distance and international calls. It charges anadditional per second surcharge for international calls. The per minute charges are the same asthe peak rate charges for direct dial calls.

Fixed charges

Both carriers increased the fixed charge component of the price of an operator-assisted callbetween 1995 and 1999. Telstra increased the fixed surcharge levied for a national longdistance call made with operator assistance from $2.80 to $3 in 1998. Telstra’s surcharge foran international call remained unchanged at $3 over the study period.

C&W Optus increased its flagfall charge from 10 cents to 15 cents and its service fee from$2.50 to $3 a call in 1998 for national long distance and international calls.

Variable charges

Telstra did not change its variable charges for national long distance calls made with operatorassistance between 1995 and 1999 (table 5.1). It made only one change to its internationalcharges in 1998, decreasing the timed charge for a call to China.

32

Table 5.1. Weighted average variable charges for operator-assisted calls: Telstra

At 30 June Nominal($/ 3mins)

Real*

($/ 3mins)Change inreal price

Indexa

National long distance calls1995 1.21 1.29 100

1996 1.21 1.24 -4% 96

1997 1.21 1.22 -1% 95

1998 1.21 1.22 0% 95

1999 1.21 1.21 -1% 94

Nominal($/min)

Real*


priceIndexa

International calls1995 2.50 2.67 100

1996 2.50 2.56 -4% 96

1997 2.50 2.53 -1% 95

1998 2.49 2.52 0% 94

1999 2.49 2.49 -1% 93



Because C&W Optus charges the same per minute rate for operator assisted and direct dialcalls made during the peak period, its customers requiring operator assistance have benefitedfrom the declines in the variable charges for direct dial calls (table 5.2). Its per secondsurcharge for international calls did not change during this time.

Table 5.2. Weighted average variable charges for operator-assisted calls: C&WOptus


Real*

($/min)Change inreal price

Indexa


1996 0.29 0.30 -10% 90

1997 0.29 0.29 -1% 89

1998 0.25 0.25 -14% 77

1999 0.25 0.25 -1% 76

33


1996 1.51 1.55 -5% 95

1997 1.51 1.53 -1% 94

1998 1.51 1.53 0% 94

1999 1.08 1.08 -29% 66

* Real prices were indexed using the CPI and are expressed in 1998–-99 dollars.a Index is calculated using real prices.Source: CRU estimates based on data provided by C&W Optus to the Commission.

Call prices

As a result of the changes described above the weighted average nominal price of a:

� Telstra national long distance call of average duration made with operator assistance (table5.3) increased by 20 cents between 1995 and 1999. In real prices this is a decline of 4 percent;

� Telstra international call of average duration made with operator assistance (table 5.3)decreased marginally between 1995 and 1999, with real prices falling by 7 per cent overthis time;

� C&W Optus national long distance call of average duration made with operator assistance(table 5.4) increased by 26 cents or 6 per cent between 1995 and 1999 but remainedunchanged in real prices; and

� C&W Optus international call of average duration made with operator assistance (table5.4) decreased by 13 per cent between 1995 and 1999. In real prices this is a decrease of18 per cent.

Table 5.3. Weighted average price of operator-assisted callsb: Telstra, 1995 to 1999


Real*

($/call)Change

in realprices

Indexa


1996 6.73 6.91 -4% 96

1997 6.73 6.82 -1% 95

1998 6.93 7.02 3% 98

1999 6.93 6.93 -1% 96

34


1996 19.10 19.60 -4% 96

1997 19.10 19.34 -1% 95

1998 19.02 19.26 0% 94

1999 19.02 19.02 -1% 93

* Real prices were indexed using the CPI and expressed in 1998–99 dollars.a Index is calculated using real prices.b Average call durations vary between carriers, making comparison of this price between

carriers invalid.Source: CRU estimates, based on Telstra (various issues), Public Switched Telephone Service


Table 5.4. Weighted average price of operator-assisted callsb: C&W Optus, 1995 to1999


Real*


Indexa


1996 3.88 3.98 -6% 94

1997 3.88 3.93 -1% 93

1998 4.23 4.29 9% 101

1999 4.23 4.23 -1% 99


1996 18.58 19.06 -5% 95

1997 18.58 18.81 -1% 94

1998 19.13 19.37 3% 97

1999 16.38 16.38 -15% 82

* Real prices were indexed using the CPI and are expressed in 1998–99 dollars.a Index is calculated using real prices.b Average call durations vary between carriers, making comparison of this price between

carriers invalid.Source: CRU estimates based on data provided by C&W Optus to the Commission.

35

6. Calls from a fixed to cellular mobileservice

Calls from a Telstra fixed service to a mobile phone

Price structure

Calls made from a Telstra fixed line service to cellular mobile phone were charged at a fixedrate of 25 cents per chargeable period between 1995 and 1998. The chargeable period,measured in seconds, varied with the time of day, distance (for calls to Telstra mobiles only),and the network being called. The only change of note over this period was when Telstraincreased the number of seconds per fixed charge to call a C&W Optus mobile in 1997, beforereducing them again in 1998.

In 1999 Telstra introduced a two part pricing structure consisting of a flagfall of 15 cents percall and a per second charge that varied with the time of day, distance (for Telstra mobilesonly) and the network being called. This led to a significant decline in the variable chargecomponent of the overall call price. The weighted average charge per minute fell by 14 centsfrom 50 to 36 cents in 1999 (table 6.1). In real prices this is a 29 per cent decrease from 1998.

Table 6.1. Weighted average variable charge for a call made from a fixed telephone toa mobile phonea: Telstra, 1995 to 1999


Real*


Indexb

1995 0.50 0.54 100

1996 0.50 0.51 -4% 96

1997 0.50 0.51 -1% 95

1998 0.50 0.51 0% 95

1999 0.36 0.36 -29% 67

a Includes calls made to C&W Optus and Vodafone mobile services.b Index is calculated using real prices.* Real prices were indexed using the CPI and expressed in 1998–99 dollars.Source: CRU estimates, based on Telstra (various issues), Public Switched Telephone Service


36

Call prices

The weighted average nominal price:

� a three minute call declined from $1.27 to $1.23 in 1999 (table 6.2). In real prices this is adecrease of 4 per cent from 1998 and 11 per cent since 1995;

� a five minute call declined from $2.10 in 1998 to $1.96 in 1999. In real prices this is adecrease of 8 per cent from 1998 and 11 per cent since 1995;

� a ten minute call decreased by 24 cents from $4 in 1998 to $3.76 in 1999. In real pricesthis is a decrease of 7 per cent from 1998 and 13 per cent since 1995; and

� an average length call has remained almost unchanged between 1995 and 1999. The realprice has declined by 8 per cent.

Table 6.2. Weighted average prices of calls from a fixed line service to a mobilea:Telstra, 1995 to 1999


Real*


Indexb


1996 1.29 1.33 -4% 96

1997 1.27 1.29 -3% 93

1998 1.27 1.29 0% 93

1999 1.23 1.23 -4% 89


1996 2.05 2.10 -4% 96

1997 2.05 2.07 -1% 95

1998 2.10 2.13 3% 97

1999 1.96 1.96 -8% 89

Ten minute call1995 4.06 4.34 100

1996 4.06 4.16 -4% 96

1997 3.86 3.91 -6% 90

1998 4.00 4.05 4% 93

1999 3.76 3.76 -7% 87

37

An average length callc

1995 0.78 0.83 100

1996 0.78 0.80 -4% 96

1997 0.78 0.79 -1% 95

1998 0.78 0.79 0% 95

1999 0.77 0.77 -3% 92

a Includes calls made to C&W Optus and Vodafone mobile services.b Index is calculated using real prices.c Average call durations vary between carriers, making comparison of this price between

carriers invalid* Real prices were indexed using the CPI and expressed in 1998–99 dollars.Source: CRU estimates, based on Public Switched Telephone Service Standard Tariff, Telstra and

information provided by Telstra to the Commission.

Calls from a C&W Optus fixed service to a mobile phone

Price structure

C&W Optus has a two part pricing structure consisting of a flagfall charge and a per secondcharge that varies by the time of day (peak, off peak or weekend) only. The per second chargeshave not changed since C&W Optus entered the local call market in 1996. The flagfallincreased once in 1998 from 10 cents to 15 cents per call.

Variable charges

The weighted average:

� charge per minute remained at 38 cents in nominal terms between 1996 and 1999 (table6.3), but real prices fell by 3 per cent.

Table 6.3. Weighted average variable charge for a call from a fixedto mobile phonea – C&W Optus, 1995 to 1999


Real*


Indexb

1995 na na

1996 0.38 0.39 100

1997 0.38 0.39 -1% 99

1998 0.38 0.39 0% 99

1999 0.38 0.38 -1% 97

a Includes calls made to Telstra and Vodafone mobile services.b Index is calculated using real prices.na Service not available.* Real prices were indexed using the CPI and are expressed in 1998–99 dollars.Source: CRU estimates based on data provided by C&W Optus to the Commission.

38

Call prices

The weighted average price of:

� a three minute call did not change in 1999 but increased from $1.25 to $1.30 in 1998 (table6.4) because of the increased flagfall. In real prices this is an increase of 4 per cent from1997 and 1 per cent since 1996;

� a five minute call increased to $2.06 in 1998. In real prices this is a 2 per cent increasefrom 1997 but these decreased again in 1999;

� a ten minute call increased to $3.97 in 1998 but in real terms decreased marginally over theperiod; and

� an average length call increased by 5 cents between 1996 and 1999 (table 5.4). In realprices this is a 4 per cent increase since 1996.

Table 6.4. Weighted average prices of calls from a fixed line service to a mobilea:C&W Optus, 1995 to 1999


Real*


Indexb

Three minute call1995 na na

1996 1.25 1.28 100

1997 1.25 1.26 -1% 99

1998 1.30 1.31 4% 103

1999 1.30 1.30 -1% 101

Five minute call1995 na na

1996 2.01 2.06 100

1997 2.01 2.03 -1% 99

1998 2.06 2.09 2% 101

1999 2.06 2.06 -1% 100

Ten minute call1995 na na

1996 3.92 4.02 100

1997 3.92 3.97 -1% 99

1998 3.97 4.02 1% 100

1999 3.97 3.97 -1% 99

39

An average length callc

1995 na na

1996 0.70 0.72 100

1997 0.70 0.71 -1% 99

1998 0.75 0.76 7% 106

1999 0.75 0.75 -1% 104

a Includes calls made to Telstra and Vodafone mobile services.b Index is calculated using real prices.c Average call durations vary between carriers, making comparison of this price between

carriers invalid.na Service not available.* Real prices were indexed using the CPI and are expressed in 1998–99 dollars.Source: CRU estimates based on data provided by C&W Optus to the Commission.

40

7. Calls from cellular mobile phoneservices

Australia has one of the highest take up rates of mobile telephony in the world. At the end ofJune 1999 there were more than 6.6 million services in operation compared to around 5.4million in 1998. On average, around 3450 mobile telephone services were added to theAustralian network each day during 1998–99 (Department of Communications InformationTechnology and the Arts, 1999).

Telstra, C&W Optus and Vodafone are currently the major providers of mobile phone servicesin Australia and all supply a service in which calls are timed. Telstra and C&W Optus supplieddigital and analogue services during the analysis period while Vodafone supplied a digitalservice only.

Price plans

The carriers generally sell their mobile services through packaged service plans. They haveintroduced a large number of plans to attract new customers with varying needs and usagepatterns. The conditions of the plans vary considerably and may waive monthly access fees,include handset subsidies, free connection, free calls and pre paid calls. Generally, low volumeusers take up plans with lower monthly access charges and higher call prices. Conversely, highvolume users tend to take up plans with higher access charges and lower call prices. Generally,once a customer signs up to a particular plan, the charges do not change over time unless thecustomer moves to a new plan. They are usually constrained from doing this until the contractperiod of their plan has expired, unless they are prepared to pay a penalty charge for leaving theplan early.

The Commission is unable to comment with any authority on the overall price movements formobile telephony because there was insufficient data to analyse the plethora of mobile pricingplans. However, five popular plans nominated by the carriers for each year between 1995 and1999 were analysed to give some indication of prices paid. The plans analysed were standardplans and not connected to handset purchases or offers. Some plans listed differ from year toyear because of the introduction and closure of plans over the period.

Connection charges

All three carriers charged $65 for connection to a digital mobile service between 1995 and1999 (table 7.1). Telstra and C&W Optus charged $45 for connection to the analogue networkover the same period. The carriers sometimes waived this fee as part of special promotions. Aweighted average price could not be estimated, however, as no data were available to indicatethe proportion of new customers that did not pay these charges.

41

Table 7.1. Connection charges for mobile services: all carriers

At 30 June Nominal ($) Real* ($) Change in real prices(%)

AMPSa GSM AMPSa GSM AMPSa GSM

1995 45 65 48 70

1996 45 65 46 67 -4% -4%

1997 45 65 46 66 -1% -1%

1998 45 65 46 66 0% 0%

1999 45 65 45 65 -1% -1%

* Real prices were indexed using the CPI and are expressed in 1998–99 dollars.a Telstra & C&W Optus only. Vodafone has not supplied AMPS in Australia.Source: Telstra (various issues), Public Mobile Telecommunications Service Tariff, and information

provided by C&W Optus and Vodafone to the Commission.

Access charges

Monthly access charges are levied for ongoing access to the mobile phone network. Accesscharges vary with each plan. In some cases, such as where pre-paid call options are available,customers do not pay monthly access fees. As already mentioned, high access charges are atrade off for low call charges and vice versa in many service plans.

It was impossible to determine whether access charges have on average increased or decreasedover the study period. Insufficient data was available to do the necessary weighted averagecalculations.

Call prices

The price of mobile calls of the Telstra plans analysed consist of a flagfall charge plus a chargeper 30 seconds. Flagfall charges differ between peak and off peak periods and between plans.The charge per 30 seconds varies by peak and off peak periods, distance (<165km or over) andplan. The call charges and plans analysed did not change significantly between 1995 and 1999.From 1 July 1999, however, charges for calls made on mobile phones changed to per secondcharging.

Subscribers to C&W Optus plans analysed pay a charge per 30 seconds for each mobile call.This charge varies by peak and off peak periods, distance and plan. C&W Optus offers itsdigital customers ‘yes time’ between 8.00 p.m. and midnight. If a customer calls another C&WOptus customer during these times, the first 20 minutes of a call are free.

42

Subscribers to Vodafone plans analysed pay a flagfall and a per second charge for mobile calls.Both charges differ between peak and off peak periods and between plans.

For illustrative purposes only the weighted average prices of one and three minute calls havebeen calculated for each popular plan nominated by the carriers and year (tables 7.2 to 7.4).Weighted average prices for calls of longer duration were not included because the callduration data supplied by the carriers indicate that the majority of mobile calls are between oneand three minutes. The average prices are for calls after any eligible free minutes or calls.

Table 7.2. Cost of mobile telephony using popular mobile plans: Telstra, 1995 to 1999

Plans and year Monthlyaccess

($)

Averageprice of a1 minute

call($)


call($)

Free calls, discounts

1995

Flexi Plan 10 (AMPS) 10 1.44 3.78

Flexi Plan 20 (AMPS & GSM) 20 0.97 2.55


Flexi Plan 80 (AMPS & GSM) 80 0.51 1.33 $52 of free calls then 5%

Flexi Plan 130 (AMPS & GSM) 130 0.51 1.33 $125 of free calls then5%

1996

Flexi Plan 10 (AMPS) 10 1.44 3.78




Flexi Plan 130 (AMPS & GSM) 130 0.51 1.33 $125 of free callsthen 5%

1997

Flexi Plan 10 (AMPS) 10 1.44 3.78




Flexi Plan 130 (AMPS & GSM) 130 0.51 1.33 $125 of free calls then5%

1998

Flexi Plan 10 (AMPS) 10 1.44 3.78

Flexi Plan 20 (GSM) 20 1.44 3.78 $5 worth of free calls




43

1999

Flexi Plan 10 (AMPS) 10 1.44 3.78

Contact 20 Flexi Plan (GSM) 20 1.44 3.78 $5 worth of free calls




Source: Telstra (various issues) Public Mobile Telecommunications Service Tariff, and CRUestimates based information provided by Telstra to the Commission.

Table 7.3. Cost of mobile telephony using popular mobile plans: C&W Optus, 1995 to1999

Plans and year Monthlyaccess

($)


call($)


call($)

Free calls, discounts

1995

National (GSM) 35 0.41 1.22 10% after $20; 20%after $40

Powerplan 120 (AMPS & GSM) 120 0.41 1.22 $110 calls included;then 20%

Powerplan 240 (AMPS & GSM) 240 0.41 1.22 $280 of callsincluded; then 20%

Metro (GSM) 25 0.50 1.50 Double chargeoutside Metro area.10% after $20; 20%after $40

Freedom (AMPS) 10 1.17 3.50

1996




Metro (GSM) 25 0.50 1.50 Double chargeoutside Metro area.10% after $20; 20%after $40

Freedom (AMPS) 10 1.17 3.50

44

1997



Freestyle Weekend (GSM) 20 1.17 3.50 $52 of localweekend calls

Freedom Plus (AMPS) 10 1.22 3.66

Today 30 (GSM) 30 0.53 1.60

1998


Freestyleintouch Plus (GSM) 25 1.17 3.50 $20 of calls included

Today 30 (GSM) 30 0.53 1.60

Yes 20 (GSM) 20 0.81 2.44

Powerplan 120 (AMPS) 120 0.41 1.22 $110 of callsincluded; then 20%

1999


Powerplan 120 (AMPS) 120 0.41 1.22 $110 of callsincluded; then 20%

Freestyleintouch Plus (GSM) 25 1.17 3.50 $20 of calls included

Today 30 (GSM) 30 0.53 1.60

Yes 20 (GSM) 20 0.81 2.44

Source: CRU estimates based on information provided by C&W Optus to the Commission.

45

Table 7.4. Cost of mobile telephony using popular mobile plans: Vodafone, 1995 –1999

Plans and year Monthly access($)

Average price ofa 1 minute call

($)

Average priceof a 3 minute

call($)

Free calls,discounts

1995

Plan 1 35 0.41 1.22

Plan 10 66 0.41 1.02

Plan 11 38 0.50 1.31

Plan 12 52 0.41 1.03

Plan 13 66 0.41 1.02

1996

Plan 10 66 0.41 1.02

Plan 11 38 0.50 1.31

Plan 12 52 0.44 1.14

Plan 13 66 0.41 1.02

Plan 14 20 0.81 2.26

1997

Plan 5 30 0.72 1.86 20 minutes

Plan 8 10 0.40 1.09

Plan 10 26 0.41 1.02

Plan 16 55 0.46 1.20 60 minutes

Plan 17 70 0.46 1.20 120 minutes

1998

Plan 10 26 0.41 1.02

Plan 16 55 0.46 1.20 60 minutes

Plan 17 70 0.41 1.15 120 minutes

Plan 20 20 1.34 3.45 5 minutes

Plan 22 30 0.91 2.35 20 minutes

1999

Plan 2 20 1.58 4.18 20 minutes

Plan 3 10 1.34 3.45

Plan 4 30 0.97 2.32 30 minutes

Plan 10 26 0.41 1.02

Plan 12 49 0.51 1.44 70 minutes

Source: CRU estimates based on information provided by Vodafone to the Commission.

46

Average prices paid

The average price per minute paid by consumers for mobile telephony, including access,connection and call charges but excluding handset costs, is estimated to have declined between1997 and 1999. The CRU estimates that nominal price per minute has declined by around 10per cent (figure 7.1). However, the average prices paid per minute by consumers for analogueservices are estimated to have increased by around 2 per cent in nominal terms over this time(figure 7.2).

Figure 7.1. Change in average price paid per minute: digital mobile services 1997 to1999

Source: CRU estimates based on data provided by Telstra, C&W Optus and Vodafone.

Figure 7.2. Change in average price paid per call minute: analogue mobile services,1997 to 1999

Source: CRU estimates based on data provided by Telstra, C&W Optus and Vodafone.

47

80

85

90

95

100

105

1997 1998 1999

Year

Index

1997=100

Real

Nom inal

90

95

100

105

110

1997 1998 1999

Year

index

1997=100

Real

Nom inal

8. The structure of telecommunicationspricing

The price changes detailed in the previous sections have altered the ‘balance’ oftelecommunications pricing between fixed and variable charges since 1995.3 That is, the fixedor ‘up-front’ charges have become a larger share of expenditure on telecommunicationsservices. The rebalance has occurred because standard charges for connection, rental and localservice have not changed significantly since 1995 while the variable charges for national longdistance and international calls have declined steadily.

One way to illustrate the change is to consider the ‘purchasing power’ of one month’s standardrental in call equivalents (table 8.1). The increase in call equivalents for the timed servicesindicates that using the telephone network has become comparatively cheaper to gaining accessto it.

Table 8.1. Call equivalents of one month’s standard telephone rental

Telstra C&W Optus

At 30 June Localcalls

Nationallong

distance*(minutes)

Internationalcalls**

(minutes)

Localcalls

Nationallong

distance*

(minutes)

Internationalcalls**

(minutes)

1995 46 23 9 na 26 9

1996 46 26 9 58 29 9

1997 46 26 9 58 29 9

1998 46 33 9 58 46 9

1999 46 42 41 58 46 13

* Peak calls over 750 kms.** Peak calls between Australia and the United States.Source: CRU estimates.

The balance between fixed and variable charges has also altered for national long distance andinternational calls. Between 1995 and 1999 variable charges for national long distance callsdecreased and the flagfall increased. Consequently, fixed charges increased as a proportion ofthe total weighted average call price for Telstra and C&W Optus (figures 8.1 and 8.2).

48

3 The report refers to fixed line services only because the price of mobile telephony couldnot be fully analysed.

Figure 8.1. Structure of national long distance call price 1995 to 1999: Telstra

Source: CRU estimates.

Figure 8.2. Structure of national long distance call prices 1995 to 1999: C&W Optus


The pattern is similar, but less pronounced, for international calls (figures 8.3 and 8.4).Although flagfall charges for international calls are identical to those for national long distancecalls, the variable charges are considerably higher.

49

Telstra national long distance

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

1995

1996

1997

1998

1999

Flagfall

Variable

C&W Optus national long distance

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

1995

1996

1997

1998

1999

Flagfall

Variable

Figure 8.3. Structure of international call prices 1995 to 1999: Telstra


Figure 8.4. Structure of international call prices 1995 to 1999: C&W Optus


50

Telstra international

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100

%

1995

1996

1997

1998

1999

Flagfall

Variable

C&W Optus international

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

1995

1996

1997

1998

1999

Flagfall

Variable

Appendix 1. Weighted average pricemethodology and future directions

Most of the prices reported in this study are weighted averages because manytelecommunications services do not have one unique price.4 These services have multiple tariffcategories where the price of the service may vary by type of customer (e.g. business,residential), the type of service (e.g. new or in-place connections) and the servicecharacteristics (time of day and destination of call).

A weighted average calculation aggregates the prices from all the tariff categories into onesingle price for the service. It is calculated by the following equation:

where:

Pt is the weighted average price for a service in time t,

is the unit price of tariff category

i in the year t; and

is the revenue generated by tariff category i in 1998.

That is, the weighted average is the sum of the unit prices multiplied by their weights, eachweight being the proportion of the total service revenue earned by the tariff category. Theprices of the tariff categories that attract the largest proportion of consumer expenditure arethus weighted most heavily. This ensures that the average price for the service is representativeof the price paid by consumers given their consumption patterns and the unit price of each tariffcategory, if ideal weighting data were available.

51

∑

∑

=

==N

i

i

N

i

i

t

i

t

R

PR

P

1

1998

1

1998

i

tP

iR1998

4 The weighted average prices for Telstra services from 1995 to 1998 may differ from thosereported in last year’s study because the weighting data used in this report are from 1998instead of 1997, as in last year’s report.

Unfortunately, comprehensive weighting data were not available and the weighting data for1998 has had to be used for all periods. The implication is that 1998 consumption patterns toall years should be applied.5

Some of the prices reported are not weighted averages, even though the relevant services havemultiple tariff categories. In these cases insufficient weighting data were available and pricechanges are therefore reported for each tariff category.

Nominal or current dollar prices were indexed using the Consumer Price Index to obtain realprices expressed in 1998–99 dollars. The nominal and real prices are reported for all services.

52

5 To the extent that consumers are able to move between tariff categories as their relativeprices change, this will introduce a downward bias to the estimates of price changes for

some services between 1995 and 1998. The same factors will introduce an upward bias

to the estimated price changes for some services between 1998 and 1999. A further

complication is that the structure of tariff categories have undergone considerable change

in some services. Combined with the upward bias introduced by using standard prices,

the estimates of these changes might have a bias, the direction of which is difficult to

determine. These are, however, the best possible estimates given the data the carriers

supplied for use in this study.

Appendix 2. Services subject to pricecontrol

The telecommunications products and services subject to price control are listed in table A2.1.This report analyses the prices of the services listed in this table with the exception of leasedline services.

The price control measures established by the Telstra Carrier Charges — Price ControlArrangements, Notification and Disallowance Determination 1997 and applicable during theperiod of this report are: 6

� a price cap of CPI-7.5 per cent applicable to eight core telecommunications servicesprovided by Telstra, which includes connections, line rentals, local, trunk andinternational calls, domestic and international leased lines and cellular mobiletelephone services;

� individual annual price caps of CPI-1 per cent applicable to Telstra’s provision ofindividual line rentals, connections, trunk call and international call services toresidential customers;

� the weighted average untimed local call price for residential/charity customers inrural Australia in the 1998–1999 financial year is not to exceed the weighted averagelocal call price for residential/charity customers in metropolitan Australia in the1997–1998 financial year;

� the weighted average untimed local call price for business customers in ruralAustralia in the 1998–1999 financial year is not to exceed the weighted average localcall price for business customers in metropolitan Australia in the 1997–1998financial year;

� a cap of 25 cents per call for untimed local calls made from a residential or businessphone, and a cap of 40 cents per call untimed local calls from Telstra publicpayphones;

� Telstra may not increase a charge subject to price control arrangements by more thanCPI without prior consent from the Commission; and,

� Telstra must provide advance notice to the Minister of an intention to alter chargesfor Directory Assistance (013) services, with the Minister then being able to disallowthe proposed changes if he or she considers that the changes would not be in the‘public interest’.

53

6 The determination for 1999 came into effect from 1 July 1999.

Table A2.1 Specific telecommunications services subject to price control

Service subject to:

As at 30 June 1999 CPI-7.5% pricecontrolbasket

CPI-1%standard

priceresidential

sub-cap

ACCCconsent

for priceincrease

above CPI

Connections– In-place connection– New connection for pensioner

�

�

�

�

�

�

Labour charges– Attendance– Per 15 minutes

�

�

�

�

�

�

Annual charges for basic telephone service– Standard business service– Non-profit business service– Non-business service

�

�

�

� �

�

�

Local calls– Standard local call charge– Pensioners’ local calls

�

�

�

�

�

�

Community calls– Direct dial from a service with call chargerecording (CCR) and no meter pulse signals– Direct dial from a service with no CCR and meterpulse signals

�

�

�

�

�

�

Pastoral calls– Direct dial from a service with CCR and no meterpulse signals– Direct dial from a service with no CCR and meterpulse signals

�

�

�

�

�

�

STD® calls– Direct dial from a service with CCR and no meterpulse signals– Direct dial from a service with no CCR and meterpulse signals

�

�

�

�

�

�

International calls– Direct dial from a service with CCR and no meterpulse signals– Direct dial from a service with no CCR and meterpulse signals

�

�

�

�

�

�

Operator-assisted international calls– Per minute rates � �

Calls to a cellular mobile service– Direct dial from a basic telephone service to acellular mobile service located in Australia. � � �

54

Digital cellular mobile service– Activation– Access and call charges

�

�

�

Leased line services � �

Source: Methodology for Administration of the Telstra Carrier Charges Price Control Agreement,ACCC 1997 and 1999.

55

Bibliography

Australian Competition and Consumer Commission (1998), Telecommunications charges inAustralia, December.

Cable and Wireless Optus (1999), Annual Financial Report.

Department of Communications Information Technology and the Arts (1999), CommunicationsNewsletter: Data, December.

Productivity Commission (1999), International Benchmarking of AustralianTelecommunications Services, Research Report, Aus Info, Melbourne, March.

Productivity Commission (1999a), International Benchmarking of Telecommunications Pricesand Price Changes, Research Report, Aus Info, Melbourne, December.

Telstra (1999), Annual Report.

� (1992a), Public Mobile Telecommunications Service Tariff, 30 June.

� (1992b), Public Switched Telephone Service Tariff, 30 June.















Vodafone (1999), media releases dated 14 and 22 July.

56

Documents

Telecommunications charges in Australia 1995-99